For a gauge on how the SME sector is performing, the Sensis Business Index is a good place to start, which is based on a survey of 1000 metro and regional small and medium businesses employing up to 199 people.
The September index reveals SME confidence decreased by six points to +38, however, is 11 points higher than the same time one year ago and still at one of its highest levels in the last five years.
There were modest improvements across all key performance indicators, including expectations for sales (up five points to +26); profitability (up three points to +19), wages (up three points to +15) and employment (up four points to +9).
According to the survey, approximately 57% of SMEs feel confident because of being an established, solid business and specific businesses strengths, while 19% of SMEs feel worried because of a lack of work or sales and unfavourable business, economic or industry environments.
Businesses in New South Wales were the most confident, exceeding the national average, albeit dropping five points to +53. Business confidence in Tasmania was also higher than the national average, jumping 22 points to +53.
Two states hovered around the national average – Queensland (up three points to +39) and the ACT (down 14 points to +35) – followed by Victoria (down 15 points to +31) and South Australia (up two points to +31).
However, Western Australia and the Northern Territory were both well below the national average, both posting falls to +10 and +9 respectively.
“Small and medium businesses on the eastern seaboard are in a much better position than their counterparts in the Northern Territory and Western Australia,” notes Sensis CEO, John Allan.
“These regions continue to struggle to adjust to changes in their local economies and both Perth and Darwin are now less confident than businesses in regional areas in those states.”
The survey also uncovers confidence levels by sector, with most sectors posting a drop in confidence, but remaining near or above the national average.
The Hospitality sector was the most confident (down nine points to +49), followed by Communications, Property and Business Services (down seven points to +47), with Health and Community Services (down 14 points to +44) and Cultural, Recreational and Personal Services (down 3 points to +44) also well above the national average.
Confidence was lowest in Manufacturing (down four points to +12), with Transport and Storage (down 16 points to +18) also well below average.
“Not surprisingly, as the Australian dollar continues to defy the Reserve Banks attempts at depreciation, the Manufacturing sector is struggling and is the least confident sector,” says Allan.
“As we head into the crucial Christmas retail period, expectations are very strong for all of the indicators, with sales and profitability particularly positive.”
In addition, the survey indicates how SMEs view the performance of the Government.
Sensis highlights the survey was taken just after the Federal Election, with perceptions of the Federal Government remaining steady in the current quarter (+2).
Small businesses felt positive towards the government thanks to tax cuts, incentives and supporting the SME sector, however the big concerns were too much of a focus on bug business, excess bureaucracy and red tape.
A snapshot of additional key findings from the Sensis Business Index include:
- SME assessments of the current state of the economy remain in negative territory, staying flat at -8.
- Views about the economy in one year’s time lifted by eight point and became positive (+5).
- More than four in ten SMBs (44%) said their business faces no significant problems.
- Metropolitan business confidence fell 15 points to +35, compared to an 8-point rise for regional SMEs to +43.
- The top performing sectors for sales were Communications, Property and Business Services (+26); and Finance and Insurance (+20), while the worst performing sector was Health and Community Services (-17), with negative balances also recorded in Transport and Storage (-5); Manufacturing (-4); Hospitality (-3); Cultural, Recreational and Personal Services (-2); and Retail Trade (-1).
- In terms of profitability, only two sectors posted positive results last quarter: Communications, Property and Business Services (+21); and Finance and Insurance (+11), with challenges for SMEs in Transport and Storage (-21); Retail Trade (-18); Health and Community Services (-18); and Manufacturing (-13).